Die Registrateur van Aandelebeurse v Cornelius Stephanus Aldum

During 1999, following the demutualisation of Sanlam and Old Mutual, many policyholders received listed shares. The respondent, a professional moneylender who was neither a stock exchange member nor a bank official, advanced short-term loans to such shareholders. Initially the loans were secured by pledge agreements over the shares, but after regulatory intervention and a court order interdicting those arrangements, the respondent replaced them with written agreements styled as loan agreements with shares as security. The Registrar of Stock Exchanges alleged that these agreements were simulated transactions disguising purchases of listed shares by the respondent, which would contravene sections 3(2) and 39 of the Stock Exchanges Control Act 1 of 1985. The Registrar sought relief, including a prohibition on the use of the agreements. After oral evidence, the High Court dismissed the application with costs, and leave to appeal was granted to the Supreme Court of Appeal.

The appeal was dismissed with costs; the High Court’s refusal of the interdictory relief and its cost order in favour of the respondent were upheld.

The case is an important authority in South African law on the doctrine of simulated transactions, particularly in the context of securities regulation. It confirms that regulatory authorities bear the onus of proving simulation and that harsh economic consequences or expectations of default do not, without more, convert loan agreements into disguised sales. The judgment also clarifies the limits of regulatory intervention under the Stock Exchanges Control Act when transactions are structured as secured loans.